Paramount-WBD merger expected to face lawsuit from states, sources say

A group of state attorneys general is expected to file a lawsuit as soon as Monday challenging Paramount Skydance’s proposed acquisition of Warner Bros. Discovery, CNBC’s David Faber reported.

The lawsuit, which will be brought by a group including California Attorney General Rob Bonta, is expected to try to block the merger on antitrust grounds, Faber reported.

The deal would combine two storied film studios — Paramount and Warner Bros. — as well as streaming platforms Paramount+ and HBO Max. Paramount CEO David Ellison has previously said the streaming services would become one following the merger.

It would also mean the formation of the largest portfolio of TV networks in the U.S., bringing together Paramount’s broadcast network CBS and pay TV channels like MTV and BET with WBD’s CNN, TNT and others.

The merger won approval from WBD shareholders in April, and Ellison said in a recent earnings call that it was on track to close by September.

The deal came under scrutiny from lawmakers in both the U.S. and Europe, including related to foreign funding that was part of Paramount’s offer. In mid-June, the U.S. Department of Justice signed off on the tie-up, clearing it of federal antitrust concerns.

“The Division has completed its analysis of the proposed merger of Paramount and Warner Bros. and determined based on the evidence received in its investigation that the transaction is not likely to result in harm to competition or American consumers,” the department said in its determination.

The merger has also won approval from several global jurisdictions as it moves toward a potential close.

However, the the European Union is still reviewing the deal for approval , with a new provisional deadline set for July 22. The European Commission said in a public filing this month that Paramount has submitted concessions in a bid to smooth over concerns regarding the deal.

Hollywood has previously expressed concerns about the combination, citing the likelihood for fewer film releases and the potential for job losses in the industry. Ellison has promised that once combined the film studios would put out a slate of 30 movies per year and has said he’s committed to protecting jobs.

Ellison first set his sights on WBD last September. Just weeks after Paramount and Ellison’s Skydance completed its merger, the company made its initial run for WBD, resulting in several bids and a formal sale process.

WBD ultimately signed a deal to sell its film studio and streaming assets to Netflix. However, Paramount launched a hostile takeover offer and subsequently amended its bid. Netflix ditched its deal, and Paramount walked away with an agreement to buy the entirety of WBD for $31 per share.